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Four Canadian Tech Stocks Worth a Second Look

Canadian tech stocks have been largely ignored compared to their American counterparts. But, for the long-term investor, there are currently plenty of great buying opportunities north of the border.

Macro-economic uncertainty in the U.S. and Europe has led to a general decline in the tech sector in both Canada and the United States. In the past year, the Nasdaq has declined 8.95% while the S&P/TSX Capped IT index has dropped 13.60%. We’ve been hit hard.

Despite the persistent economic gloom, short-term fears have undervalued plenty of stocks for Canadian investors looking for long-term profitability. Canadian investors that are willing to do a little research can easily find value within Canadian tech firms.

Thackray’s 2011 Investor’s Guide also notes that a period of seasonal strength in the tech sector is quickly approaching. From October 9th to January 17th, trading has been profitable in 14 of the past 20 periods with average gain per period at 10.4%.

Here are 4 Canadian tech stocks that have been beaten down by the market and are now undervalued. Although these Canadian companies are not as sexy as their American cousins, they have a good financial history and are currently trading at a bargain.

This is a look at the valuation and fundamental strength of 4 undervalued Canadian tech stocks.

1. Enghouse Systems Ltd. – ESL.TO is a provider of enterprise software through its speech and voice recognition solutions. It also offers visual-based software solutions for the design and management of complex network infrastructures.

Enghouse Systems recently announced third quarter financial results with $31.8 million, an increase of approximately 22%, in revenue compared to the same period last year.

2. Evertz Technologies Ltd. – ET.TO provides hardware and software equipment to the television broadcast industry in Canada, the U.S. and internationally.

Evertz has been strengthening its economic moat with average net profit margins at a healthy 25.14% as well as lowering its capital expenditure ratio to 5.32% in the last fiscal year. Revenues have also been rising at approximately 6% year over year.

In early June, Evertz bought back 5% of outstanding shares citing that the current price did not adequately reflect the underlying value based on the company’s financial position.

3. Miranda TechnologiesMT.TO Miranda Technologies develops and manufactures various signal processing and distribution products, such as the conversion from standard definition to high definition broadcasting.

Its second-quarter profits beat estimates and they are set for another big year with the London Olympics and U.S. elections. Revenue has risen 35% to $43.2 million in the last quarter.

Miranda Technologies was recently added to the S&P/TSX SmallCap Index. Strath Goodship, President and CEO, said, “Our inclusion should further increase the liquidity of Miranda’s shares and heighten our exposure to a broader range of investors”.

4. MacDonald, Dettwiler and Associates Ltd. – MDA.TO was founded in Richmond, B.C. and offers geospatial information solutions for the surveillance and intelligence sectors. They have recently announced that they are assisting U.S. Air Force to safely guide aircrafts in unprepared landing zones.

Daniel Friedmann, CEO, gave a cautious outlook over concerns with project delays and government cutbacks. Friedman predicts flat revenue for next year despite its successful quarter given the cutbacks in government spending, which could pose serious headwinds for MDA.

Second-quarter operating profits jumped 28 percent with revenue rising 21% to $194.9 million. However, if MDA can maintain the same pace of growth in the long-term, they are currently undervalued by 156.16%.

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